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When you are out looking for different types of insurance policies, you will come across many terms that you don’t really understand. Some terms and ideas pertaining to life insurance policies can be confusing too. This is why you have to sit with an insurance agent and ask all the questions you can so you know what you are getting. Or you can simply search online and after a few days of research you will know what insurance policies are all about and how you can benefit from different types of policies.
When looking for life insurance policies, you will come across the most common term and whole life insurance policies. These are the most commonly used terms as well as the most popular life insurance policies. The difference between the two are great but can’t be understood unless you do some research. Here are some key points that separate these policies from each other. After reading the information below you should be able to make a wise decision.
Term Life Insurance
If you look at the name you will already realize what this policy is. There is a term for which you are covered in this policy. The term of the policy can be 5 years, 10 years, 20 years and 30 years. This is the term during which your policy has some value. If you pass away during the documented term, your beneficiaries will receive the sum against your policy. However, if you don’t pass away and the term expires, you will not receive anything for your insurance policy. However, you can always renew the term of your policy to keep the insurance.
As you go for renewal you will have to pay more in your premiums. This is because by the time you renew your policy you will have aged and thus the possibility of you dying during the term of the policy is higher. Despite the rising cost of the policy with you aging, it is still the most affordable type of life insurance policy out there. The biggest difference to best understand the pros and cons of term and whole life insurance is that in this type of policy you are only covered for the death benefit. If at any given moment you change your mind about your insurance policy, you can always convert it into a whole life insurance policy too.
Whole Life Insurance
Since they are begin compared side by side you should get an idea what whole life insurance would be. This is the life insurance policy in which you are covered for life. You get the payout of the policy irrespective of when you die. However, this particular policy has two repositories where your deposited money is going: one portion goes into the policy whereas the other portion goes to a savings account. This savings account is known as the cash value of the policy that grows with time with no taxes inferred on it.
In simplest words, whole life insurance policy gives you the guaranteed death benefit and in addition to that there is a cash value that you get. The biggest advantage of this type of policy is that your premiums remain the same. All the data analysis has to be done by your policy provider before you are offered insurance. You will also have to go through thorough medical exams. Once the premium of your policy has been decided, it will remain the same for the life of your policy. The biggest disadvantage is its premium at the same time. Its premium will always be much higher than the premium paid into a term life insurance policy.
Final Words
It depends on your needs which policy you will pick. Some people pick term life insurance because they know they won’t be able to afford the premiums of the whole life insurance policy within their financial resources. On the other hand, people pick whole life insurance because they have the attraction of guaranteed payout in it. In addition to that, they are also attracted to the savings portion of this policy. Some people go with whole life insurance also because it is the most straightforward insurance policy out there. Now, it is time for you to do your research and pick the one that’s best for you.
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